Mataf

EUR/USD - Euro Dollar
1,3527. EUR USD is in an downtrend directed by 4H exponential moving averages. EUR USD is in a consolidation after the last bearish movement. The volatility is high. ForexTrend 4H, daily (Mataf Trend Indicator) is in a bearish configuration. 1H ForexSto (Modified Stochastic) indicate a bullish pressure on EUR USD. The consolidation should continue. The price should continue to move in 1,3350 / 1,3660 range. We won't take a position. The risk/reward ratio is too high to take a position..
Resistances
1,3620 - 1,3660
Supports
1,3445 - 1,3300

GBP/USD - British Pound Dollar
1,7025. GBP USD is in an downtrend directed by 1H exponential moving averages. GBP USD is in a consolidation after the last bearish movement. The volatility decreases. Bollinger bands are flat. ForexTrend 4H, daily (Mataf Trend Indicator) is in a bearish configuration. The consolidation should continue. The price should continue to move in 1,6800 / 1,7150 range. If the support is broken then the target will be 1,6600 (425 pips).
We are waiting for a break of the support to take a short position.
Resistances
1,7150 - 1,7240
Supports
1,6890 - 1,6800

USD/CAD - US Dollar Canadian Dollar
1,1757. USD CAD is in an uptrend supported by 1H exponential moving averages. USD CAD is in a consolidation after the last bullish movement. The volatility is high. Bollinger bands are parallel and form the trend. ForexTrend 4H, daily (Mataf Trend Indicator) is in a bullish configuration. 1H ForexSto (Modified Stochastic) indicate a bearish pressure on USD CAD. The consolidation should continue. The price should continue to move in 1,1500 / 1,2000 range. We won't take a position. The risk/reward ratio is too high to take a position..
Resistances
1,1800 - 1,2000
Supports
1,1670 - 1,1500

USD/CHF - Dollar Swiss Franc
1,1356. USD CHF broke 1,1320 resistance. USD CHF moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility rises. Bollinger bands are deviated. 1H, 4H ForexSto (Modified Stochastic) indicate a bullish pressure on USD CHF. The price should continue to move in 1,1130 / 1,1480 range. We won't take a position.
Resistances
1,1415 - 1,1485
Supports
1,1300 - 1,1230

USD/JPY - Dollar Yen
100,02. USD JPY is in a consolidation after the last bearish movement. USD JPY is in a range between 98,70 and 101,35. The volatility is high. Oscillators are neutral. The price should continue to move in Bollinger bands. We won't take a position.
Resistances
100,85 - 101,35
Supports
99,30 - 98,70

The final capitulation?

The final capitulation?
In last week's report, I held out the prospect that the US government rescue package might result in a change in sentiment in financial markets and signal the start of the healing process. I also noted "The major risk to this outlook is that I am premature and there is a final spasm of market pessimism, resulting in a capitulation collapse across asset classes." Unfortunately, my timing was off and the latter outlook proved to be the case, well beyond my worst nightmares. But in this process, there are many rays of hope. One of the contrarian indicators that suggest a market is in the process of bottoming is a final plunge, usually driven by panic selling emanating from emotionally ravaged investors. Such was certainly the case this week, culminating on Thursday and Friday with massive declines. But on Friday, the collapse was not sustained and US stock exchanges managed to finish near flat on the day. One of the other indicators of a market bottom is just such a day's price action, best symbolized as a 'star' on daily candlestick charts. The long tail at the bottom represents the final wave of selling which was ultimately reversed by new buying entering the market. While I run the risk of being premature again, I remain optimistic that this was indeed a key reversal day.

Lost in the panic this week were the novel steps taken by global central banks to address the credit market freeze and limit its impact on their non-financial, 'real' economies. Among these are the Fed's decisions to buy commercial paper directly from firms; lend directly to non-financial companies shut off from normal credit; double the size of the TAF auctions to provide further liquidity to banks; pay interest to banks on reserves held at the Fed; and orchestrate a global rate cut. Many of these efforts still need to be fully implemented, but they are coming. Most important appears to be the idea of using some of the $700 bio rescue package to inject capital directly into banks (see below). Other central banks are taking similarly aggressive and proactive measures, including guaranteeing inter-bank lending and bank deposits, as well as making capital injections directly into banks. Additional measures are likely to be announced over the weekend, as the G7 and G20 are set to convene along with the IMF/World Bank regular meeting. Additionally, Eurozone leaders are set to meet in Paris on Sunday to develop Europe- specific policies to address banking sector strains. That leaves us still waiting for signs of concrete change rather than just relying on talk, which is what sent markets plummeting this week. Still, I think stocks are more likely to stabilize rather than continue to plunge, but that risk is still out there. I'll be keeping an eye on the same barometers of credit conditions outlined in last week's report. Of those, I would note that gold plunged today, despite fear remaining palpable.--Brian Dolan

Outlook for currencies during the turmoil
While we wait to see how government steps to stabilize the banking sector play out and how markets react, there are two main drivers in the Forex market. The first is fear and risk aversion, which characterized this week's price action. During such panic driven turmoil, the JPY strengthens across the board, and JPY-crosses (e.g. AUD/JPY, GBP/JPY, EUR/JPY and CAD/JPY) plunge. Such cross selling pressure weighs on other dollar pairs, sending GBP/USD, EUR/USD, and AUD/USD lower and this is frequently viewed as USD strength. As fear abates and stock indexes recover, the JPY is sold and the JPY-crosses move higher. The other main driver is, in fact, heightened demand for USD, and this stems from two main sources. First, as investors flee other asset classes, whether stocks or commodities, they seek the safest investments, primarily US Treasury securities, which require USD to purchase. The second source of USD demand stems from credit market demand for USD spilling into the currency market. When markets begin to stabilize and credit conditions start to normalize, I expect demand for USD to diminish rather abruptly. Hopefully, it's clear that more stable markets will lead to higher JPY-crosses and a lower USD. Lastly, there is economic data, which was completely overlooked in this past week. Next week, however, a trove of significant US data awaits, and it is not expected to be USD friendly.

While there are no guarantees that such stabilization will emerge, and traders will need to remain extremely flexible, I am optimistic that we have made a key low in the JPY-crosses and a likely peak in the USD. USD/JPY and the JPY-crosses show similar bottoming patterns on Friday's daily candlestick charts, namely 'stars' and 'hammers.' Reversal signals are less evident in other USD pairs, with the exception GBP/USD which presents a likely hammer. I would now look to start buying GBP/JPY, AUD/JPY and EUR/JPY on dips into lows seen this week. In the USD pairs, I would look to buy GBP/USD and EUR/USD on weakness into the 1.6850/6900 and 1.3250/3300 area, respectively. Strength over 1.7200 and 1.3550 likely signals those pairs are set to move directly higher.--Brian Dolan

The last best hope … direct capital infusions to banks
With the latest attempts to instill confidence in US financial markets (passage of the TARP and Fed rate cuts) failing miserably for now, the US Treasury may attempt direct capital infusions by potentially acquiring preferred stock in banks. Ostensibly, Treasury Secretary Paulson and some of his top aides are looking into this and may begin buying stakes in banks within the next few weeks.

With the TARP plan, the government wipes a bad asset (toxic mortgage) from the banks’ balance sheets but only adds to its capital if it pays more than what the bank has already marked that asset down to. This would then leave those banks in a position to seek capital from outside sources in order to bolster their balance sheet. In the case of the capital infusion, however, the banks’ balance sheets would be instantly repaired.

This would of course come at the expense of current shareholders, who would suffer dilution as a result of the government’s participation. However, the planned $200 billion infusion (using funds from the appropriated $700 billion in the TARP) would likely fully re-capitalize the US financial system. Credit market losses in the US are currently running at just over $380 billion, with only $220 billion in capital raised as an offset. This leaves a $160 billion gap that would be instantly filled with the proposed $200 billion infusion and would provide a good cushion to the system.

In terms of the credit markets, this should limit the counter party risk drastically as newly capitalized banks would be less likely to default. Credit spreads would come in from recently astronomical levels and capital would likely begin to flow more freely. This would in turn likely see the recent pessimism in the stock market reverse and send equities markedly higher. The G-7 members are purportedly throwing this idea around in terms of applying it in other countries as well, which would be a welcomed sign for global markets. –Jacob Oubina

Key data and events to watch next week
The US calendar next week is packed with top-tier economic data. Tuesday starts things off with the monthly budget statement. Wednesday has producer prices, retail sales and the NY Empire manufacturing index due up. Thursday is even busier with consumer prices, initial jobless claims, capital flows, industrial production, Philly Fed manufacturing index and the NAHB home builder confidence index. Housing starts, building permits and the University of Michigan sentiment index round out the week on Friday. There are also 11 Fed speakers next week with Fed Chairman Bernanke and Fed Vice Chairman Kohn on Wednesday as the highlights. Look for the Fed’s latest Beige Book on Wednesday as well.

The Euro-zone calendar is a touch less eventful. French business confidence, French consumer prices, Euro-zone ZEW, German ZEW and Euro-zone industrial production all kick off the week on Tuesday. Wednesday follows with German and Euro-zone consumer prices while Friday rounds out the week with the Euro-zone trade balance. ECB President Trichet is due to speak on Tuesday and German Finance Minister Steinbrueck is up on Thursday. Also look for an EU leaders’ summit on Wednesday.

Japan’s economic calendar is modestly busy and kicks off with domestic CGPI on Monday. Consumer confidence, the current account and trade balance are due on Tuesday. Wednesday has industrial production on tap while Thursday sees the tertiary industry index. Nationwide department store sales and a speech by the BOJ's Shirakawa close the week out on Friday.

The calendar in the UK is on the light side. Producer prices and RICS home prices start the action on Monday. Tuesday has retail and consumer prices due up while Wednesday has the all-important employment report on tap. Also watch for a speech by the BOE’s Sentance on Monday.

Canada is ultra light in terms of economic data with only manufacturing shipments on Thursday. The Canadian election will be the main focus on Tuesday, with Canadian Prime Minister Stephen Harper still leading in the polls.

It is relatively quiet down under as well. New Zealand retail sales kick off the week on Sunday evening. Tuesday then sees Australian business confidence. Wednesday has New Zealand business PMI and the Australian leading index on tap. Last but not least, look for Australian import and export prices on Friday. –Jacob Oubina

Mataf

EUR/USD - Euro Dollar
1,4484. EUR USD is in a consolidation after the last bullish movement. The volatility is high. Bollinger bands are parallel and form the trend. ForexTrend 1H (Mataf Trend Indicator) is in a bullish configuration. 4H ForexSto (Modified Stochastic) indicate a bullish pressure on EUR USD. The price should consolidate. The price should continue to move in 1,4250 / 1,4600 range. We won't take a position. The risk/reward ratio is too high to take a position..

Resistances
1,4550 - 1,4600
Supports
1,4380 - 1,4250

GBP/USD - British Pound Dollar
1,8286. GBP USD is in a consolidation after the last bullish movement. The volatility is high. ForexTrend 1H (Mataf Trend Indicator) is in a bullish configuration. 4H ForexSto (Modified Stochastic) indicate a bullish pressure on GBP USD. The price should find a support above 1,8100. The uptrend should continue to gather momentum. We won't take a position. The risk/reward ratio is too high to take a position..

Resistances
1,8380 - 1,8500
Supports
1,8110 - 1,7920

USD/CAD - US Dollar Canadian Dollar
1,0488. USD CAD broke 1,0580 support. USD CAD is in a consolidation after the last bearish movement. The volatility is high. Bollinger bands are parallel and form the trend. ForexTrend 1H (Mataf Trend Indicator) is in a bearish configuration. 1H, 4H ForexSto (Modified Stochastic) indicate a bearish pressure on USD CAD. The price should find a support above 1,0425. The consolidation should continue. If the support is broken then the target will be 1,0300.
We are waiting for a break of support to take a short position.

Resistances
1,0580 - 1,0670
Supports
1,0440 - 1,0380

USD/CHF - Dollar Swiss Franc
1,1017. USD CHF is in a range between 1,0900 and 1,1250. USD CHF moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is high. Oscillators are neutral. The price should continue to move in 1,0900 / 1,1250 range. We won't take a position. The risk/reward ratio is too high to take a position..

Resistances
1,1110 - 1,1250
Supports
1,0980 - 1,0900

USD/JPY - Dollar Yen
106,60. USD JPY is in a consolidation after the last bullish movement. USD JPY moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is low. Bollinger bands are flat. Oscillators are neutral. The price should continue to move in 105,00 / 108,00 range. We won't take a position. The risk/reward ratio is too high to take a position..

Resistances
107,20 - 108,00
Supports
106,35 - 105,00

Government actions cloud the USD outlook

Government actions cloud the USD outlook
Oww! My head hurts. A lot has happened in the course of the past week and like many in the market I'm having some difficulty getting my head around what has happened and what it means going forward. The major news is clearly the US government plan to form a Resolution Trust Corporation (RTC)-like entity to absorb toxic MBS (mortgage backed securities) debt from financial firms' balance sheets. The focus here is on returning the US financial sector to some form of normalcy so it can resume supplying badly needed credit to the US economy, which is a good thing. Many details of the plan are yet to be revealed, not the least of which is the expected cost, which leaves many questions still open, and that is a bad thing. (For instance, how much more will banks need to write down when they off-load their troubled MBS debt, and what will that do to their capital reserves and ability to lend?) The details are expected to be ironed out over the weekend and in coming negotiations between Fed/Tsy/Congress next week, with a likely plan in place by the end of the week. In the meantime, I offer my preliminary thoughts on what recent developments mean for the USD and other currencies below.

The most recent effort by the US government to stabilize the financial sector, and by extension the housing market and Main Street economy, likely represents a final turning point in the sub-prime credit crisis that began well over a year ago. Looking ahead, these are clearly positive developments for the US economy and reinforce the case that the US will be able to avoid a recession in the current soft patch. But the implementation and impact of such measures will take time, probably months at least, to be realized. In the short-run, concerns over the explosion in US government liabilities that come with the RTC plan will likely weigh on USD sentiment. In the short-run, the greenback looks to have further room to fall in what is now shaping up to be a USD correction lower. In EUR/USD, the upside looks to be in play while prices hold above 1.4390 on a daily closing basis, with that level marked by the 21-day moving average and the Kijun line from daily Ichimoku charts. The upside sees key resistance at 1.4580 from the base of the weekly Ichimoku cloud, and channel resistance from a possible bear flag above at 1.4680/700, making the high-1.46/low-1.47 area a zone to consider re-establishing EUR/USD short positions.

If we step back and look at economic fundamentals, however, the outlook for the USD arguably just got a lot better. Between the takeover of Fannie/Freddie and now the RTC solution, mortgage and consumer credit are likely to be greasing the economy's wheels in the near future. Congressional leaders are also set to put forth a second economic stimulus package that could provide an additional boost, especially in job creation, into the end of the year. In contrast, governments outside of the US have been considerably less active in taking steps to support economic growth, even though many of their economies are likely already in recession (UK, Eurozone, Japan, Canada, and NZ). Also, interest rate spreads have narrowed in favor of the USD to levels last seen when the USD peaked on Sept. 11, removing a minor interest rate disadvantage since then. The fundamentals will eventually re-assert themselves and we'll need to watch the data closely. However, whereas the USD was able to shrug off weak/disappointing data during its rebound since mid-July, it's now more likely to experience a more even-handed reaction (falling on weak data/recovering on better news) during this period of correction.--Brian Dolan

Risk appetites return, for the moment
The most significant currency moves over the last two weeks took place in the JPY-crosses, the proxy for risk seeking/aversion in FX. JPY-crosses, like AUD/JPY and EUR/JPY, were pummeled lower as credit markets seized up and then rebounded as the latest, and hopefully final, US government initiative was announced. However, I am skeptical that this sudden return to risk-seeking behavior can be sustained. To say that the US or global outlooks remain uncertain would be a gross understatement. At the minimum, markets do not even have a handle on the large or fine print of the RTC bail-out package yet, and the numbers being discussed are alarming, not inspiring. Commodity prices are also showing indications of risk aversion remaining elevated, so I would caution traders not to get carried away with carry trades from current levels (e.g. EUR/JPY at 155). --Brian Dolan

Review of US government steps to stabilize markets
Government officials in the US enacted a few initiatives this week in an attempt to calm what was a tumultuous week for global markets. We highlight these measures below.

• Planned government facility to rid banks of toxic mortgage securities
From the scant details offered thus far, it seems the plan is basically for the US government to create a sort of super fund that will buy the distressed mortgage paper from the banks -- effectively removing the toxic assets from their balance sheets. Little else is known in terms of the extent of write-downs the participating banks will have to take upon the sale of such assets, or exactly what the government will do with the paper. One major brokerage recently sold most of its bad mortgage assets for roughly 20 cents on the dollar in an attempt to clean out its balance sheet, so there is definitely some precedent here in terms of pricing.
The ultimate cost of this bailout has been bandied about, with a plethora of estimates included. Treasury Secretary Paulson said flat out that the plan will cost US taxpayers “hundreds of billions” of dollars. Some members of Congress put the price tag of the bailout at $1 trillion and we’ve even seen some market economists’ estimates in the order of a whopping $3 trillion. When you consider that a handful of the major US banks held roughly $500 billion of these troubled “level 3” assets as of 2Q, this suggests the total holdings across the entire financial landscape are colossal. Thus the real cost of this measure could indeed surpass the $1 trillion mark. Congress will meet with Treasury and Fed officials over the weekend and we expect details to emerge shortly thereafter.

• Ban on short-selling financial equities
In an attempt to stem the declines in shares of US financial companies the Securities and Exchange Commission enacted a ban on short-selling shares of roughly 800 companies. The ban in the US is set to run through October 2nd while a longer-term measure in the UK (enacted a day earlier) bans short-selling of financials through the end of this year. This gives the financial sector some breathing room while the mortgage bailout is worked out, though it will be curious to see what happens once the US rules expire. The fact that many of these institutions will likely have to take write-downs on their sale of toxic mortgage assets to the government could see their share prices come under pressure once again.

• Backstop for money-market funds
The losses in financial stocks seeped into the assets of many money-market funds this week, leading to an exodus (~$90 billion) of cash as investors feared the worst. Fearing a classic “run on the banks”, the US Treasury pledged to insure investor losses in such funds through the next year. The Treasury will seemingly use an “emergency pool” of roughly $50 billion to backstop the losses. This added safety net could see a major influx of cash into these funds, where the rates of return are typically higher than those of risk-free assets. If this flood were to also come from overseas, it would be an overall positive for the buck.--Jacob Oubina

Key data and events to watch next week
The US data calendar is relatively light next week, but other more import events will be closely watched. All eyes will be on Treasury Secretary Paulson and Fed Chairman Bernanke as they testify on the credit turmoil on Tuesday before a Senate panel. Bernanke is up again on Wednesday testifying before the Congressional Joint Economic Committee. Thursday has Paulson and Bernanke together again, this time before a House panel where they will talk about the GSE takeovers. In data, the action kicks off on Wednesday with existing home sales. Thursday is busy with initial jobless claims, durable goods and new home sales due up. Friday rounds out the week with the final cut on 2Q GDP and the University of Michigan confidence survey.

It is a touch busier in the Euro-zone in terms of data. French consumer spending kicks things off on Tuesday, with PMIs for the Euro-zone also due up that day. Wednesday sees French business confidence, Euro-zone current account and the German IFO business climate survey. Germany’s all important GfK consumer confidence survey is up on Thursday. Friday closes out the week with German import prices, French consumer confidence and French final 2Q GDP. ECB speakers next week include Trichet on Monday, Stark on Wednesday and Bini Smaghi on Thursday.

In the UK it’s all about housing in a very light week. Rightmove home prices are on deck for Sunday night followed by home purchase loan data on Tuesday. On the speaking circuit we have the BOE’s Gieve on Monday, Sentance on Wednesday and Barker on Thursday.

Japan also sees a very light week. The all industry activity is up on Sunday evening and then we wait until Wednesday for the trade balance numbers. Thursday rounds out the week with consumer prices. BOJ board member Noda is scheduled to speak on Thursday as well.

Canada sees little action next week also, starting with retail sales on Monday. Tuesday sees consumer prices and Thursday has Bank of Canada Governor Carney on deck.

Last but not least, it is extremely quiet down under. New Zealand Westpac consumer confidence starts it all off on Wednesday. The RBA releases its Semi-Annual Financial Stability Review on Thursday with New Zealand GDP also up that day. Friday rounds out the week with Australian new home sales.--Jacob Oubina

iFOREX.bg

Technical Analysis Daily: GBP/USD
GBP/USD 1.8003 - Sep 15 08 08:56 GMT

GBP/USD Open 1.7934 High 1.8128 Low 1.7542 Close 1.7942
The British Pound also started climbing significantly on Friday against the US Dollar from Friday's bottom 1.7542 to today's top 1.8128, which are the first support and resistance levels respectively for the currency couple today. If the positive trend continues, next resistance is expected at 1.8200, followed by 1.8310. In downward direction next support for today is expected at 1.7450, the break of which would lead to next target 1.7365.

Technical resistance levels: 1.8130 1.8200 1.8310
Technical support levels: 1.7540 1.7450 1.7365
Trading range: 1.8015 - 1.7940

Trend: Downward
Sell at 1.8003 SL 1.8033 TP 1.7953